The Evolution of Deposit Insurance in a Digital Age: Strengthening the Financial Safety Net for Tomorrow’s Challenges

13th May 2026 

Key takeaways

• The 2025 revision of the IADI Core Principles of Effective Deposit Insurance Systems conceptualizes deposit insurance as an integral component of the financial safety net, mandating cooperation and coordination, pre-arranged public backstops, and information-sharing protocols, and calling for the use of deposit insurance funds to support non-payout resolution subject to strict conditions. 
• Financial innovation, from stablecoins and tokenized deposits to central bank digital currencies, along with the emergence of new actors, such as fintech and deposit intermediaries, presents fundamental challenges to traditional deposit insurance models. Coverage boundaries, operational resilience, cyber risk management, and the amplifying effects of social media on depositor behaviour in an era of instantaneous digital banking require urgent attention of policy makers.

Introduction

Deposit insurance stands as one of the most successful institutional innovations in finance. Since the widespread adoption of deposit insurance in the early 1990s, explicit deposit insurance systems have become a standard feature of financial safety nets. The 2008 global financial crisis prompted many jurisdictions to strengthen deposit insurance systems further and to extend their scope and coverage levels. Deposit insurance has proven instrumental in preventing depositor runs, maintaining confidence in banking systems, and protecting retail savers from losses they are neither equipped to assess nor able to absorb. It addresses the inherent vulnerabilities in the banking system that arise from two structural features: information asymmetries and maturity transformation. At its core, deposit insurance is about safeguarding confidence in the financial system while enabling banks to perform their socially valuable role. It serves as a public good by preventing contagion across the banking system, breaking the mechanism whereby uncertainty at one institution rapidly spreads to others. In an era characterized by rapid technological change, geopolitical uncertainty, and evolving financial intermediation, deposit insurance systems remain as relevant as ever—perhaps more so.

The effectiveness of deposit insurance depends critically on its design, credibility and integration within a comprehensive financial safety net. Prudential supervision seeks to prevent excessive risk-taking and identify weakening institutions before they fail. Resolution frameworks provide authorities with tools to manage the failure of institutions in an orderly manner, minimizing costs and disruption. Central banks stand ready to provide liquidity to solvent but temporarily illiquid institutions. And fiscal authorities should be able to ultimately  backstop the financial safety net in extreme circumstances.

This integrated view of the financial safety net has gained increasing prominence in international policy discussions. The global financial crisis revealed coordination failures and gaps between safety net components in many jurisdictions. The subsequent establishment of specialized resolution authorities created new institutional actors requiring coordination with existing safety net participants. Deposit insurance systems worldwide have evolved considerably, with many expanding beyond simple “paybox” functions. A growing number of deposit insurers now operate under expanded mandates with active roles in crisis management. The proportion of deposit insurers involved in resolution has risen from 67% in 2013 to 82% in 2024. More than 35% of deposit insurers globally today identify themselves as resolution authorities.

More recently, the advent of digital currencies and deposit alternatives has given rise to questions about the scope and application of deposit protection. They demand careful consideration of the fundamental purposes deposit insurance serves in maintaining financial stability and public confidence.

Against this backdrop of profound change, the International Association of Deposit Insurers (IADI) undertook a comprehensive revision of its Core Principles for Effective Deposit Insurance Systems, completing this work in September 2025 after an extensive public consultation. 

This contribution examines three interconnected dimensions of deposit insurance evolution: 

1. First, it provides an overview of the key changes introduced in the 2025 Core Principles revision. 
2. Second, it explores the substantive challenges arising from financial innovation and digitalization.
3. Lastly, it examines the implications for international coordination and policy development.

 1. The 2025 IADI Core Principles Revision: evolution, not revolution

The Core Principles were first jointly adopted in 2009 by IADI with the Basel Committee on Banking Supervision. They responded to a call from the Financial Stability Forum, the predecessor of the Financial Stability Board (FSB), for an international set of principles for effective deposit insurance systems. Their first revision, undertaken in 2014, took into account the development of the FSB Attributes of Effective Resolution Regimes and the establishment of resolution authorities. The latest revision that was completed in 2025 reflects lessons learned from the March 2023 banking turmoil as well as fundamental shifts in the financial landscape, including digital transformation, evolving resolution frameworks, and the expanding mandates of deposit insurers globally. Guiding this most recent revision were  four primary objectives: (i) adopting a holistic view of the financial safety net with deposit insurance as an embedded component of the broader safety net, rather than an isolated function; (ii) addressing interactions with resolution frameworks; (iii) introducing aspirational elements alongside essential baseline assessment criteria; and (iv) future-proofing the principles amid technological shifts.

1.1 Embedding Deposit Insurance within the Financial Safety Net

The 2025 revision introduces a conceptual shift by defining the role of deposit insurance within the broader financial safety net. Rather than viewing deposit insurance as a standalone function, the revised framework positions it as an integral component of the financial safety net. It distinguishes between the “deposit insurer” (the entity providing guarantees) and the “deposit insurance system” (the broader ecosystem of the supervisory, resolution, lender-of-last-resort and deposit insurance functions interacting with each other). 

The events of 2023 highlighted the importance of coordination of financial safety net functions. In the US, the failures of Silicon Valley Bank, Signature Bank and First Republic Bank required close collaboration among the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve, state regulators, and the U.S. Treasury. Authorities had to take critical decisions within a short timeframe, balancing depositor protection, financial stability, and moral hazard considerations, while managing public communications to avert panic. Similarly, the challenges faced during the Credit Suisse crisis in Switzerland revealed shortcomings in decision-making processes and the absence of pre-established protocols, and underscored the necessity of coordinated action among financial safety net participants.

To address these gaps, the revised principles emphasize the need to formalise coordination through memoranda of understanding or other arrangements that ensure timely and comprehensive exchange of relevant information among safety net participants, regular testing of crisis management capabilities, protocols for making decisions under stress and for consistent communications to manage depositor and market expectations during crises. 

The public backstop for the deposit insurance fund is a critical component of the financial safety net. Principle 9 (Sources and Uses of Funds) stipulates that the deposit insurance fund must have access to such public support, with repayment obligations borne by member institutions. This preserves market discipline while ensuring that insured depositors’ claims can always be met. It aligns with the FSB Key Attributes, which advocate that backstop arrangements should ensure recovery of funds from the financial industry rather than taxpayers, and reflects the post-crisis consensus that while public support may be necessary during extreme situations, its costs should not be socialized. 

1.2 Strengthening the Interaction between Deposit Insurance and Resolution

A second major area of focus of the revision is the relationship between deposit insurance and bank resolution. The 2025 revisions to the IADI Core Principles strengthen the integration of deposit insurers with resolution frameworks, acknowledging their expanding role in resolution. Many jurisdictions have broadened the mandates of their deposit insurers, allowing them to support resolution activities beyond the traditional role of reimbursing depositors. 

This trend is particularly evident in the recently adopted Crisis Management and Deposit Insurance framework (CMDI) in the European Union (EU). Following the global financial crisis, the EU introduced the Bank Recovery and Resolution Directive (BRRD), which established specialized resolution authorities with the power to restructure failing banks. In parallel, the Deposit Guarantee Schemes Directive (DGSD) was implemented to harmonisation of deposit insurance across member states. However, whereas resolution authorities have sought greater flexibility to utilize available resources, deposit insurers have expressed concerns about the potential depletion of their funds for purposes beyond their core mandate. The CMDI addresses these tensions by defining the conditions under which deposit insurance funds can be used to support resolution efforts. The central challenge lies in striking an appropriate balance between the competing objectives of providing resolution authorities with the resources and flexibility they need, protecting deposit insurance funds from potential misuse or depletion, maintaining market discipline, and ensuring public confidence in deposit protection. To this end, Principle 16 (Use of the Deposit Insurance Fund in Resolution) formulates critical safeguards for situations where the deposit insurer is not the resolution authority. The principle also imposes strict conditions on the use of deposit insurance funds in resolution: a deposit insurer’s net contribution should not exceed the net amount that would have been paid in a liquidation scenario. Gross contributions should be capped at the amount of insured deposits in the failing institution, effectively preventing any open-ended financial commitments. The use of deposit insurance funds for recapitalization is permitted only in exceptional cases and only after equity or other instruments of ownership are written down to absorb losses, minimizing moral hazard and the risk of repeated calls on the fund. 

1.3 Raising Ambitions While Maintaining Adaptability

A structural innovation in the 2025 revision is the introduction of “Additional Criteria” alongside “Essential Criteria”. The Essential Criteria establish baseline expectations that apply to all deposit insurance systems, ensuring a minimum standard across jurisdictions. Meanwhile, the Additional Criteria outline voluntary best practices that elevate ambitions without mandating universal compliance. This structure acknowledges the diversity among IADI’s membership, which spans jurisdictions with varying levels of economic development and institutional capacity.

Under Principle 15 (Reimbursing Depositors), for instance, the seven-working day reimbursement standard established in the 2014 principles is retained as an essential criterion. However, the revised principles introduce a more ambitious three-day reimbursement standard as an aspirational best practice reflecting the expectations of depositors in the modern, digital economy who now assume near-instant access to their funds. 

A similar approach is applied to funding mechanisms under Principle 9 (Sources and Uses of Funds). The revised principles introduce differential, risk-based premium systems as an aspirational goal rather than an essential requirement. Risk-based premiums, which align institutional contributions with their individual risk profiles, can encourage market discipline. However, implementing such systems requires advanced capabilities, including access to timely supervisory data, methodologies for assessing risk, and mechanisms for translating risk measures into premium differentials. 

1.4 Financial Innovation and Digitalisation

The 2025 revision aims to future-proof the Core Principles, so they remain relevant amid technological shifts, without prescribing specific technologies.  A key change in the updated Core Principles is the shift from an institutional to a functional approach. Previously, the scope was defined by reference to banks; now (see Principle 7 on mandatory membership) it covers all insured deposit‑taking institutions, defined as entities authorised to accept deposits and subject to prudential regulation, supervision and resolution regimes. This functional approach accommodates institutions that are not strictly banks (for example, financial cooperatives) and may also, if supported by a clear policy rationale, encompass other non‑bank entities that offer deposit‑like products, provided the institutions offering them are subject to adequate prudential regulation and supervision, and effective resolution regimes. 

Another key update addresses the rise in operational risks for deposit insurers. The new Principle 4 on Business Continuity Management mandates that they maintain robust frameworks to withstand disruptions, including cyber threats, pandemics, and third-party failures.

2. Challenges arising from financial innovation and digitalisation: new products and uncertain boundaries

2.1 Digitalisation Is blurring the Deposit Perimeter

Digitalisation is blurring the clarity of the deposit perimeter. Tokenised deposits and stablecoins perform deposit-like functions while operating outside, or only partially within, established prudential and safety-net frameworks. Concurrently, large digitally enabled deposit-placement platforms are reshaping how deposits are sourced and distributed, straining the design assumptions on which modern deposit insurance rests.

Tokenised deposits offer prospective efficiency gains, faster settlement, programmability through smart contracts, and improved reconciliation. However, they introduce new operational and legal complexities that need to be managed. Where the issuing entity is a licensed bank and the underlying liability meets the applicable legal definition of a deposit, tokenised deposits should, in principle, fall within the existing deposit insurance perimeter. Nevertheless, reimbursement and beneficiary-verification processes will need to be adapted to accommodate on-chain representations.

Stablecoins increasingly replicate the economic characteristics of demand deposits if they circulate as instruments of payment. However, their legal classification, prudential treatment, and the protections afforded to holders vary across jurisdictions and issuer types.

In the United States, the GENIUS Act, enacted on 18 July 2025 and applicable from January 2027, establishes a federal framework premised on a structural separation between stablecoin issuance and deposit-taking. Permitted payment stablecoin issuers are required to maintain full, one-for-one reserves composed of high-quality liquid assets and are prohibited from paying interest. Payment stablecoins are expressly excluded from deposit insurance. On 7 April  2026, the FDIC proposed a rule that would also preclude pass-through deposit insurance coverage for reserve accounts held at FDIC insured deposit-taking institutions by payment stablecoin issuers, treating such accounts as single corporate deposits subject to the standard USD 250,000 limit rather than as beneficially disaggregated sub-accounts. Accordingly, US payment stablecoins sit unambiguously outside the deposit insurance perimeter.

In the EU, regulators distinguish e-money tokens  which capture fiat-backed stablecoins, and ordinary bank deposits a distinction that looks increasingly challenging as tokenisation blurs the boundary between the two.  Under the Markets in Crypto-Assets Regulation (MiCA), e-money tokens may only be issued by e-money institutions or banks. Both tracks leave holders without deposit protection, and all issuers must state this in their white papers. Where a bank issues e-money tokens , the liabilities are treated as ordinary banking liabilities, placed on the general balance sheet and eligible for intermediation, a structure that, economically, resembles a deposit. Yet e-money token  holders rank as unsecured creditors in a bank failure. The CMDI reform package does little to close the protection gap. It extends deposit insurance on a pass-through basis to funds that an e-money institution holds at banks, offering protection against the failure of the bank holding the reserve but not against failure of the e-money issuer. 

As tokenisation advances and stablecoins become more embedded in payment systems, applying the “same risk, same rules” principle in a digitised financial system while preserving the integrity and special character of deposit insurance for deposits is becoming increasingly harder.

2.2 Deposit Placement Intermediaries

Alongside tokenisation, deposit intermediation is being reshaped by platforms that operate squarely within the legal perimeter of deposit insurance but fundamentally alter how deposits are placed, priced, and protected. Two archetypes illustrate distinct models.

In the United States, IntraFi operates a bank-to-bank network that allows for the  distribution of a customer’s balance across multiple FDIC-insured institutions in sub-USD 250,000 increments, each qualifying for statutory coverage. This is a business model operating within a single regulatory regime, designed to extend the effective coverage ceiling for a depositor through a single banking relationship.

In Europe, Raisin operates a marketplace that connects retail and institutional savers to deposit products offered by licensed banks across the European Union. This business-to-consumer and business-to-business model prioritises yield optimisation and cross-border access under a regime of harmonised deposit insurance.

These channels are substantial and growing. In the United States, reciprocal deposits reached approximately USD 454 billion by the end of 2025, providing material funding support to community banks and representing 4.2% of total insured deposits. In Europe, Raisin has intermediated more than EUR 30 billion across hundreds of partner banks in over thirty countries. Their scale generates clear benefits alongside distinct challenges for deposit insurance systems.

On the benefit side, depositors gain access to more competitive rates and greater convenience without the need to manage multiple direct banking relationships; smaller institutions benefit from diversified funding and enhanced reach; and competition intensifies as search and switching costs diminish. On the risk side, platform intermediation can weaken market discipline if institutions with elevated risk profiles exploit intermediated channels to attract insured funding at scale. Effective coverage may expand faster than premium calibration can adapt to if risk-based assessments do not adequately reflect the characteristics of platform-sourced deposits. Timely reimbursement depends critically on the availability of accurate, up-to-date beneficial ownership data; where such data are held by the platform rather than the receiving bank, payout execution may become more complex.

Deposit placement intermediaries thus present deposit insurers with a policy tension. Their growth reflects, in one sense, the success of deposit insurance as a public confidence mechanism: depositors seek the protection it affords. At the same time, platform growth may increase moral hazard dynamics by expanding the effective contingent liability of the deposit insurer. Addressing this tension requires deposit insurers to engage directly with deposit placement intermediaries, given that their data standards and operational practices have direct implications for the insurer’s capacity to execute the rapid reimbursements on which depositor confidence ultimately depends. Against this background, IADI has identified the digital intermediaries in deposit-placing markets as a priority area for further analytical and policy work.

3. Collaboration on Crisis Management and Deposit Insurance in the Digital Age

Financial safety nets encompassing prudential supervision, lender-of-last-resort facilities, resolution frameworks, and deposit insurance are inherently national in their legal architecture. Yet they must operate coherently in an environment where digital financial instruments move across borders. Digitalisation is simultaneously reshaping the perimeter and the operational infrastructure of deposit insurance in ways that transcend any single jurisdiction.

International coordination can serve several critical functions: anchoring shared principles on what constitutes a protected, par-value claim eligible for deposit insurance; developing data and payout standards capable of interoperating across technological platforms and legal systems; and supporting coordinated planning and crisis management for institutions whose operations span multiple jurisdictions.

The 2025 revision of the IADI Core Principles represents a significant milestone in this regard. It embeds deposit insurance more systematically within coordinated financial safety nets; clarifies expectations for cooperation among deposit insurers, supervisory authorities, resolution authorities, and central banks across jurisdictions; and establishes a foundation for data-sharing, payout standards, and testing protocols capable of functioning reliably in cross-border contexts. Taken together, these enhancements promote greater convergence in how authorities prepare for, communicate about, and execute actions during periods of stress, reducing the risk that divergent national approaches produce conflicting outcomes.

Implementation of the revised Core Principles is proceeding against a backdrop of profound structural transformation driven by financial innovation and digitalisation. Novel products test traditional coverage boundaries; advanced technologies introduce new vulnerabilities, notably cyber risk; and social media combined with mobile banking accelerates depositor behaviour in ways that demand near-instantaneous institutional responses. Meeting these challenges requires not only adaptation of mandates and operational capabilities, but sustained and structured international cooperation: timely information-sharing; common operational playbooks and data standards; joint crisis simulations and testing exercises; coordinated resolution strategies and public communications; and systematic peer learning and capacity building that helps raise standards across diverse jurisdictions.

The depositor confidence on which modern financial systems depend remains as foundational in the digital age as when deposit insurance systems first emerged. Preserving it requires maintaining the delicate balance between credible protection and market discipline that has long defined the success of well-designed deposit insurance systems while ensuring that the actions of national authorities are aligned so as to prevent regulatory fragmentation and cross-border contagion.

Author's Note:

1. The views expressed in this contribution do not necessarily reflect the views of IADI or its members. Special thanks are extended to Bert van Roosebeke, Alberto  Orts Torres and Nan Zhou  for their helpful comments.

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